Asia Base Oil Price Report

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Ample supply and slowing demand continued to place downward pressure on base oil spot prices in Asia. Seasonal patterns, along with macroeconomic uncertainties were affecting demand not only in Asia, but in other regions as well, reducing export opportunities and the possibility of shipping product to locations outside of Asia to lower inventories at home.

Asian buyers have delayed purchases in hopes of seeing downward price adjustments, and in some cases, their strategy seemed to have worked as suppliers have adjusted indications down to promote sales. The price adjustments hinged on the fact that some base oil grades appeared to be more available than others. In general terms, supply of API Group II grades was heard to be ample, and several sellers have revised prices down. A key Singapore producer has restarted operations, following a turnaround that started in late April, and has adjusted prices down as well.

The Group I cuts have also started to lengthen, but recent and ongoing maintenance at a number of Group I facilities have resulted in tighter supplies of some grades, and prices have by and large held their ground.

Similarly, ongoing turnarounds at two Group III facilities – one in Spain and one in South Korea –

resulted in reduced global spot availability of these grades. As a result, prices were said to be less exposed to downward pressure, although some adjustments have taken place due to buyers’ resistance to steeper price levels. There were also reports that product from the Middle East was filling some of the supply gaps, and alternatively, this region was also attracting lower-priced surplus cargoes of other grades from Asia.

In Southeast Asia, outages at a couple of Indonesian plants earlier this year have resulted in more limited spot volumes of Group I base stocks. A Thai producer was heard to have had some availability, which was offered through a tender and ostensibly sold to a Chinese importer. The resumption of production at a key Group II facility in Singapore allowed for more Group II base oils to enter the market.

In regional trade, a 2,000-metric ton cargo was quoted for shipment from Malacca, Malaysia, to Singapore in July. A 3,000-ton lot was on the table for lifting in Yeosu, South Korea, to Manila, Philippines, in mid-July. A 1,200-ton parcel made up of three grades was discussed for shipment from Yeosu to Port Klang, Malaysia, in mid-July. A 1,300-ton lot was also mentioned for lifting in Yeosu to Jakarta, Indonesia, in mid-July. A 1,500-ton cargo was also likely to load in Yeosu for Ho Chi Minh, Vietnam, in late June/early July.

In Northeast Asia, a Japanese refiner was reported to have started a two-month turnaround at its Group I refinery in late May. A second Japanese producer started a turnaround in April and was expected to complete it this month, reducing Group II output. A Group I facility in Japan was also scheduled for permanent closure in the second half of 2023.

A South Korean Group II and Group III producer has reported to have started an extended turnaround in late May that will last until July.

A second South Korean producer has scheduled a month-long turnaround beginning in mid-August, and was heard to have limited its spot shipments to build inventories and cover requirements during the outage.

In the key market China, a large refiner’s Group I and Group II plant continued to be partially off-line, but other facilities in China were running well. Most grades were readily available from domestic sources, prompting suppliers to adjust domestic prices down, and buying interest for fresh imports remained lackluster. Importers were trying to find a home for their existing stocks before venturing out into the market again. Plentiful availability of white oils, which enjoy tax advantages, also placed pressure on domestic base oil values.

Similarly, Indian producers have revised Group I prices down, making domestic material more attractive and dampening buying appetite for imports. Furthermore, buyers remained cautious about securing additional barrels because of falling prices and plentiful supplies. Base oil demand in India has declined given that blenders stocked up before the start of the monsoon season as the heavy rains bring logistical and transportation headaches. Indeed, Cyclone Biparjoy caused power disruptions and shipping delays in Pakistan and India last week as several ports and terminals were closed. While the cyclone brought excess rain in northwest India, it also attracted moisture-laden winds from south, central and east India, causing a rain deficit that intensified the current heat wave, local media sources reported.

Indian buyers were also confident that they would be able obtain imported product in coming weeks as several cargoes were expected to arrive in India, including some tonnage from the U.S. Due to lackluster base stock uptake in other countries in Asia, suppliers continued to explore options to ship product to India.

Meanwhile, market participants kept an eye on both international developments and crude oil prices. The United States Secretary of State, Antony Blinken, met with China’s President Xi Jinping in Beijing earlier this week, and India’s Prime Minister Narendra Modi held meetings with President Joe Biden in the U.S., where Modi also met with CEOs of several industry giants like Tesla, Apple and Google. Germany’s Chancellor Olaf Scholz received China’s Premier Li Qiang in Berlin to discuss trade, climate change and the war in Ukraine on Tuesday. These visits highlight efforts by the different governments to repair or strengthen relations and find collaboration opportunities amidst global social and economic challenges.

Base oil buyers and sellers were also monitoring crude oil and feedstock values, as these were impacted by geopolitical forces and, in turn, affected base oil price sentiment and refinery operations. The current lower price of distillates acted as a disincentive for refiners to stream feedstocks into diesel production and supported base oil output because of more attractive margins. This factor was also contributing to increased supplies and healthy base oil inventories.

Crude oil futures plunged by about 4% on Thursday on news that the

Bank of England would be hiking interest rates by a higher amount than expected, fueling concerns about the country’s economy and oil consumption. The rate hike, together with comments from the U.S. Federal Reserve Chair about potential future interest rate increases, overshadowed a surprise draw in U.S. crude inventories.

On June 22, Brent crude Augustfutures were trading at $74.21 per barrel on the London-based ICE Futures Europe exchange, from $75.67/bbl on June 15.

Dubai front month crude oil (Platts) financial futures for July settled at $73.85 per barrel on the CME on June 21, from $72.54/bbl on June 14.

Spot base oil price assessments in Asia were steady-to-soft this week, with buying and selling indications for some grades succumbing to downward pressure due to growing supply and slowing demand. The price ranges portrayed below reflect discussions, bids and offers, as well as deals and published prices widely regarded as benchmarks for the region.

Ex-tank Singapore prices were generally softer compared to the previous week, although bids and offers were sparse and discussions for flexibag cargoes took the spotlight. Ex-tank spot prices were adjusted down to reflect the general downward trend. The Group I solvent neutral 150 grade was assessed down by $20/t at $870/t-$900/t, and the SN500 was also lower by $20/t at $990/t-$1,030/t. Bright stock also dipped by $20/t to $1,220/t-$1,260/t, all ex-tank Singapore.

Prices for the Group II 150 neutral were down by $20/t at $970/t-$1,010/t, and the 500N was also lower by $20/t at $1,010/t-$1,050/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was unchanged at $700/t-$740/t, and the SN500 was also steady at $840/t-$880/t. Bright stock prices were hovering at $960/t-1,000/t, FOB Asia.

The Group II 150N was assessed down by $10/t at $840/t-$880/t FOB Asia, and the 500N and 600N cuts also edged down by $10/t to $890/t-$930/t, FOB Asia.

In the Group III segment, prices were lower from the previous week. The 4 cSt was assessed down by $10/t at $1,500-$1,530/t, and the 6 cSt was also down by $10/t at $1,470/t-$1,510/t. The 8 cSt grade also slipped by $10/t to $1,090-1,130/t, FOB Asia, for fully approved product.

Gabriela Wheeler can be reached directly at gabriela@LubesnGreases.com. 

Lubes’n’Greases shall not be liable for commercial decisions based on the contents of this report.

Archived base oil price reports can be found through this link: https://www.lubesngreases.com/category/base-stocks/other/base-oil-pricing-report/

Historic and current base oil pricing data are available for purchase in Excel format.

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